Econet Makes A Whopping $23 million Profit

Tough as it might be, while other operators are making significant loses, Econet Wireless has come out as wounded wolf but strong, making a whooping 23 million profit.

We are just coming from an Econet Wireless stakeholder briefing where the company has emerged stronger though bruised by a plethora of a non performing economic environment and gruesome tax environment which is slowly forcing the telecom sector on its knees.

In all honesty its now a game of the survival of the fittest as the main voice revenue channels continue to dwindle. But, it seems the mobile network giant has got it all figured out according to the group CEO Mr Douglas Mboweni.

Speaking today before various stakeholders, Mr Mboweni said that he knew the voice revenues were going to dwindle and they had to think way ahead of time to make a contingency plan, which today is reaping dividends.

As Econet Wireless Zimbabwe today released its interim results for the six months ended August 2015 which showed that despite a drop in revenues and profits, the company’s strategy of reducing its dependence on declining voice revenues is steadily showing progress.

Econet was the first telecommunications company to take pre-emptive strategies in anticipation of the reduction in revenue from voice calls by launching an array of overlay services that are over time expected to become significant contributors to revenue, says Douglas Mboweni, the company’s Chief Executive Officer.

Commenting on Econet’s results, Mr. Mboweni cited the challenging operating environment, the regulatory directive on tariffs and increased taxation in the form of excise duty and handset duties as having had a significant negative impact on revenues during the period under review.

Econet Group CEO Douglas Mboweni
Econet Group CEO Douglas Mboweni

Revenue in the six months to August 2015 fell by 17.6% compared with the same comparative period last year, although the EBIDTA margin of 38% is comparable to other regional telecom businesses. Mr. Mboweni said he was happy with the increase in the contribution to revenue from the Overlay Services, which accounted for 11% to the top line compared with 7% in the previous period.

These results come against the backdrop of a themed “Beyond The Phone” Expo where Econet is displaying an array of innovative products and solutions. The products include the revolutionary Connected Home, which allows subscribers to monitor their homes 24/7 as well as control home gadgets via their mobile device remotely. The Tap and Pay Card, which has a contactless payment feature allowing subscribers to experience shopping convenience at the same level as in advanced economies; and 4G/LTE which allows live streaming and live gaming.

Mr. Mboweni said the “Beyond the Phone” Expo showed that Econet had long realized that the telecommunications business model of depending on voice revenue would have to change. “This is a global telecom industry wide phenomenon. We therefore took a position to diversify our revenue streams leveraging on our robust infrastructure. Today we have a technology bank, mobile financial services, an insurance business and most recently we have added a bouquet of connected lifestyle products,” he said.

He said Econet is now offering bundled services leveraging the solid Econet business model to give customers unparalleled value and convenience. “Econet has a unique position in the market in that it is the only operator has the widest offering of diversified products and services across different industry sectors,” Mr. Mboweni said.

Commenting on the financial results, Econet Zimbabwe Group CFO, Roy Chimanikire said, “While we have initiatives to improve revenue in place, we are also implementing an aggressive cost rationalisation programme to help improve earnings. These initiatives cut across all our cost drivers in terms of OPEX and CAPEX”.

Meanwhile, Mr. Mboweni said Econet is confident that its robust business model driven by innovation and diversified product range will enable Zimbabwe’s largest mobile phone company to increase revenue, improve earnings and ensure sustainable growth.

Mr. Mboweni said Econet strongly believes that its services business, Econet Services will eventually eclipse its voice business as the largest revenue earner.

Econet Services currently contributes 11% of Econet’s revenue in Zimbabwe through services like EcoCash, EcoSure, EcoFarmer, EcoHealth and Connected Services. If it were a stand-alone company, it would be almost comparable in revenue terms to Econet’s two mobile rivals.

Econet Services also plays a key role in Econet customer loyalty strategy as these unique services also enable the company to hold onto key customer segments. EcoFarmer, for instance, has over 695 000 farmers who use it.

EcoSure currently has more than 1.3 million customers and EcoHealth has 682 000 customers. As unique services they have a loyal customer base that need Econet lines to access them. By far the biggest services are EcoCash with nearly 5 million and EcoSure with about 1.3 million customers. Econet has also begun to bundle these services into its packages making it difficult for competitors to lure its best customers.

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